naked capitalism

Maju says:

First, complexity is a most complex matter. This really limits our ability to understand and manipulate the problem.

Anyhow, I think that Externality made a quite decent assessment, in the sense that rather than intrinsic complexity it is a problem of “elite autism”, so to say (in the popular sense of the term “autism”: inability or limited ability to pay attention to the rest).

I would maybe have put it in terms of class conflict but really we can to some extent disregard this terminology and talk of elites and common people instead, allowing us to integrate other forms of elites distinct from Capitalist ones, such as the former soviet bureaucracy or the extant bureaucracies of the Capitalist world or the technocracies of the private companies, which have their own vested interests and are nothing but a private bureaucracy after all.

When Tainter says that “Human societies are problem solving organizations”, he is disregarding a key issue: whose problems does the system attend to? Because it is not the same to solve (or attempt to solve) the problems of the broader society (mostly made up of workers or otherwise commoners) than to solve the problems of a small financial elite, for example (say a small military-industrial complex technocracy or whatever).

Hence there is a key problem with goals, objectives, priorities. Which problems are the ones that are for the “complex system” prioritary to solve? It is not the same to have full employment as central goal than to have the profits of businesspeople as such main target, it is not the same to focus on environmental balance and preservation than to have industrial and economical development as priority. Different real (not just declared) priorities will produce different results and will require different types of “complex” organization. For instance, if a society makes of rapid development and full employment a central goal, a more or less classical socialist system may be the answer, instead if a system wants development and investors’ profits as its goals, then a capitalist system may be the choice. Other options may lack of clear historical references but that does not mean that they are not practicable.

In general I’d say that the goals of commoners or workers are in the line of full employment and a dignified, not too harsh, way of life for all or a vast majority, the goals of private elites are clearly profits first of all (with a major risk of social breakup if those profits are taken at the expense of other priorities), the goal of a state is geopolitical relevance (maybe hegemony) and therefore militarization and general economic advance, the goal of humankind as species (biological, general) is survival and hence there is an interest in keeping at least some ecological balance, etc.

We can well say that, simplifying, we have three classes: capitalists, bureaucrats (including military and “private” technocrats) and workers. All share the generic biological human needs but each has its own distinct priority. The ones in better position are without doubt the bureaucrats/technocrats because they are needed in all scenarios: they are the actual managers, however bureaucracies tend to stagnate in their own vicious circles (corporative and private interests beyond their stated goals, such as salaries, permanence, status, etc.)

So maybe we should address the problem of complexity not as much as one of “societies” (a vague concept) but as one of bureaucracies, of management structures and their real goals.

russell1200 says:

I would normally be thought of the type of person that loves Tainter, but I find him less than compelling at times.

Tainter gives a reasonable explanation for the mechanism by which societies can collapse: and not all that he comments on are of the Alpha Empire type.

But he is very weak on process. And if you are in the middle (or near end?) of the process, it is the process that would concern you. In addition, he comes off as one of these very divisive people with all the answers, which tends to restrict his input. Both posters-Foppe and Eternalitys’ comments are indicative of his weakness within the area of process.

Jack Goldstone, http://en.wikipedia.org/wiki/Jack_Goldstone at George Mason, does a much better job of laying out a process. His book on Revolution in Early Modern Europe will give you a very deja vu feeling without him beating you over the head with it. The discussion of credential crises (too many people wanting degrees for positions that previously did not require them) in 17th century England is worth the price of admission alone. Peter Turchin has taken some of this and tried to model it mathematically. But at times, Turchin, having found a really nice hammer, seems to think everything is a nail. Poster-Externally would probably appreciate their approach.

I am not sure that the Japanese are good example of resilience. Much of their current ills were self induced by a massive property bubble. In their earlier system (19th to 20 century) they pulled off a poster-child expand to the point of collapse empire. Their social cohesion seems to work for them and against them.

Richard Kline says:

I have read and own Tainter’s text, and ditto for some of Jack Goldstone’s work, read papers by Turchin and should take a whack at some of his texts (but I’m doing other things with my time just now). Tainter’s thesis is too detailed for any brief summary, but the skinny is I’m not sold on it. I might add that the decline of societies is something I’m studied and modeled extensively.

First, some points where I don’t quite match up with Tainter. Then a bit of alternative perspective. I think that the concept that societies ‘fall’ because they are overcome by a stress or stresses cannot readily be supported historically. A violent, external conquest by massively superior force is an exception, but even then one often finds that the pre-existing society survives beneath the veneer of a non-indigenous, rent-extractive elite. Western Europe had a third of its population die in a few years in the Black Plague: virtually nothing changed in the near terms, and the long-term changes were largely within the parameters of pre-existant traditions. China had in excess of 20 million killed and massive economic dislocation in the series of insurrections around the Taiping movement. The chief result was that the _foreign occupation_ was mortally wounded while Chinese society only reinforced itself. I can think of many other examples, but I’ll reiterate the point: societies, that is coherent cultural traditions in an enduring population, generally are not smashed. So Tainter’s arguments leading to ‘ . . . and then the stress was too much’ form a series with no sum, in my view.

Second, the idea that decreasing marginal returns destabilize societies strikes me as questionable. My reading of the historical record is that marginal declines are more likely to lead to a plateau or stagnation; not the same thing as a ‘societal decline’ and not at all a ‘fall.’ We aren’t typically talking about functions like predator-prey cycles because stagnation simply means that folks live a little smaller—but they still live, and with much the same traditions and institutions. Again, there is a germane exception to this, that of resource _collapses_ of the kind Jared Diamond (and others before him) discuss. So, not a marginal decline but a genuine collapse, and in the classic instance a precipitous one. This isn’t really what Tainter is talking about, and any of us would recognize something like, say, a massive and enduring drought as a societal game-changer which needs no other explanation.

Third, Tainter’s contention that a ‘reserve productive capacity’ is necessary to meet stresses which, if exceeded, leads to failure is a misconception, presenting what is an issue of social psychology as one of engineering. Distribution of resources is a _social_ phenomenon, not really oneengineering or management. In a crisis, societies can often get by with what they have, or even a good deal less, if distribution provides most with a minimum: distribution, and the social coherence and political traditions and mechanisms necessary, determines outcome. Slack capacity is just a crutch for bad distribution or bad politics. Societal ‘failure’ in such contexts where slack is used up isn’t really an issue of resources then but of societal inflexibility (read inequality and/or parochialism). Pseudo-engineering explanations for societal processes have always struck me as attempts to take the politics out of the processes involved to achieve ‘a more scientific’ approach, but simply mis-frame the real issues in view, much as I say here.

Fourth, the contention that “Human societies are problem solving organizations” is, to me, a gross misreading also. It is a human conceit that our societies are ‘designed,’ that they have ‘goals,’ and that our ‘plans’ really matter. While there are certainly designs, goals, and plans in societal processes, and I don’t mean to describe them as ‘meaningless,’ they are minor components in my view. Societies as I see them are faced with a material context and a problem set [my term] of existing institutional capacities and political or sub-political traditions. Most of these are driven by situations rather than designed. Decisions on ‘how to make things work’ often are effected locally, and at the larger scale self-organize rather then are ‘planned.’ Elites co-opt (or form) useful distribution niches and seize positions of authority (more than they are given authority), and from there “that’s how things are done.” That’s a very simplistic summary In know, but a good one would take 100 pages. Societies do not _exist_ to solve ‘problems,’ they are the default stabilization of available, localized solutions. Sometimes then unrealized potentials—irrigation, commodity import, more tolerable justice system, [your choice here]—are fairly evident; sometimes fairly evident improvements are actualized. Sometimes not. But it is self-inflated hubris to think that societies ‘solve things’ as opposed to mangage a host of conflicting, Rube Goldberg workarounds. And that’s without factoring in the cussedness of human nature to take the money and run regardless of what society ‘expects.’

Tainter’s best point to me of what is presented here is that where decreasing marginal returns happen, and they do happen, have-nots definitely lose some or all of their stake in societal maintenece or even coherence. This is well-understood from the anthropological level, and I think most of us get the idea at the emotional level too. This points toward the loss of _social coherence_ as the driver to declines, not an inadequate resource capacity. Tainter had a thesis and he stuck to it commendably but with the unfortunate aspect that he spent little time with the _behavior of society_. Which to me is where the action is.

I would say that societies decline for loss of social coherence, principally driven by four, mutually influential processes: cyclical arcs, institutional obselescence, cumulative power concentration, and irreconcilable parochial pursuits. The latter three are inherently driven to maxima at zeniths in the first one. There is no certainty that one will get a ‘collapse’ as a result, but a ‘decline’ is structurally predictable, with the signature of behavior typical if not invariant as unique, well, _stresses_ do come up and perturb the general pattern.

There are inherent cyclical oscillations with nested harmonic periods in any complex society. Having studied the phenomenon, I’ll say that that is not an hypothesis but a demonstrable fact, but the demonstration far exceeds time here so I’ll have to leave that as an assertion. Shot-term cycles; long-term cycles: what cycles? Well, relevant to Tainter’s analysis, I would assert that what could be called social coherence and resultant energy of action vary coincidently so that one will get peaks and troughs of each. The period is quasiperiodic (roughly regular in plain English) and sharp peaks and troughs rather than smooth ones on the whole, I suspect due to cumulative lags in synchrony. If cycles are nested but harmonic, that means that peaks, transitions, and troughs can compound (small, middle, and large effects all occuring together). Thus one can have, say, REALLY active points and real sloughs of despond for societal groups as a whole _regardless_ of their traditions, organization, and be it said their plans. Having looked at most historical examples of large-scale societal declines and collapses, it is my conclusion that they correspond to massively compounded cyclical transtions from periods ending. There are counter-examples; the number of instances is not so great that one could say the sample of instances is satisfactory. As a general assertion, I think this one is safe. Societies ‘collapse’ because their page of time turns on them. (Different societies have each their own book though the pages and chapters are always the same size, but that’s another bundle of arguments.) Peaks tend to be late in cycle arc as I said above, so one gets the real effect of a societal acme with abrubt more than gradual fall off. That peak can get spent in stasis/civil discord btw is the society has weak institutions or high parochialism: the level of coherence can’t contain the enhanced activity so the social pieces fly off in different directions. Their are many internal dynamics too which would be useful for this discussion but are just too involved, sorry folks.

Institutional obselescene, or said differently over-determined normative solutions, are a separate issue, and one that comes closest to what I rather think Tainter wanted to get at with his marginalist model. If at any given point a society faces a problem set in a specific context as mentioned above, a functional response to that does tend to develope, whether mostly intentionally or completely self-organized. —And that’s the way things are done afterward because ‘this works,’ and moreover because groups and individuals attach themselves to partsof how that ‘system’ works and strive to maintin, or better to maximize, _those present positions_. But the situation, it changes. It changes for social reasons; it changes for resource regions; it changes changes for cumulative reasons; it changes by chance. Hell, it changes for reasons of marginal declines, but as you see these are only one amongst many drivers. But the system, it DOESN’T change, or changes very little, because all of those grasping maximizers don’t want a damned thing to change because they’ve got this thing _wired_, baby, or will by next Wednesday. The ‘solutions,’ ‘organizations,’ and ‘institutions,’ which a societal group come up with, large and small, tend to fall out of synch with the changing circumstances of society; some evolve, but many drag. This is an inherent problem but the result is that ‘the system’ will end up fighting ‘the reality’ sooner or later, and reality tends to drive those less embedded in the system further from coherence. What we often have at an acme is the system of a society and those closely engaged with it pushing maximally hard at The Way while those pushed to the margins are pulling away or to more comfortable alignments where they can; then the system slows down as the arc passes, and *snap*. More or less.

Cumulative power concentration is the most invidious of developments, but in some senses the dynamic isn’t in the first instance a moral or even political one because it, too, is likely inherent. As a _vector_ not as an outcome: we can choose to modulate it’s course, and such a decision is a moral one. I’ve some time ago discussed issues of nodal concentration in systems, but we can take a simple phrase every one knows to illustrate this dynamic: the rich get richer. Or better, the powerful exponentiate. Great fortunes can get lost, stolen, or broken, but then act like local gravity wells with value and influence sliding down into them. A system maximizes such nodes and, given sufficient iterations, freezes around them barring external perturbations. So the rich will get richer, and the system, ANY social system, will tilt in toward their inclination if the context is more or less stable. Unless those nodes are deliberately capped, or otherwise buffered. So long-running societies will tend to increasingly aggregate power in fewer and fewer hands. Socially, this is dysfunctional, and we see the result many times: other ranks defect, or at least non-cooperate because they’re not getting enough out of ‘the system.’ The vector of nodal concentration inherently erodes social coherence independent of the cyclical dynamics to amplify or damp social coherence. A severely concentrated society can which has lost coherence can blow apart at peaks—think French Revolution in its way—or fall apart at troughs—think the Fall of the Roman Empire, for one—but again this isn’t an issue of resource resere per se but of destructive distribution, that is of malignant concentration. It is a moral necessity to withstand concentration of wealth and power to maintain a society; not to maintain a _just_ society, though that too is true, but to maintain ANY society over time. If the powerful win, things fall apart. Period. This is the principal dynamic in why most complex societies fail, in my analysis, metasticized concentration of power tears apart social coherence. Seriously, the rich aren’t worth it to the rest of us. Humanity hasn’t quite learned this particular lesson yet . . . .

Irreconcilable parochial pursuits are much the most evident in the historical record. They make visible news, and news gets written down. To put it simply, if Karl wants to go left and Fritz wants to go right, they don’t even need to reach a fork in the road for the society they both carry on their shoulders to fall apart. ‘S gonna happen. The point about separate trajectories of action is not their content though. This is the great misnomer. The content, practical or moral, of particular sub-group objectives is much talked about but functionally irrelevant compared to the loss of compatability/coherence. And the real point I mention parochial irreconcilables is that their vectors tend to get maximally pushed at peaks simply because everyone is pushing their own wheel around as hard as they can. Part of what troughs mean is that the wind comes out of the sails of disputes. They may be more bitter than ever, but commonalities get a chance to scab over &etc. If a society was stabilized around a given group of people to begin with (barring conquest of unreconciled groups), there is likely to be sufficient residual commonality or unseverable organization to withstand parochial disputes in and of themselves. Squabbles make the news, but they generally don’t either fall _or_ decline societies by themselves. They are a contributing factor, but the least one if the one most discussed as I read it.

If you’ve made it through the preceding, it will be clear to your friend that I don’t see any single-effect explanation of societal decline as even possible, let alone accurate. That includes Tainter’s marginal suffocation interpretation as a sole explanation. Societies are multi-vector phenomenon, and any modeling of their behavior has to place multiple vectors in the same frame of reference and attempt go gauge how they feed into and off of each other. You have my synopsis here, for what it’s worth.

Tao Jonesing says:

Society is no more complex today than it was two hundred years ago, not in real terms.

What has changed is not the complexity of our society, but the amount of specialization within it. Specialization yields experptise within a very narrow area while fostering ignorance of everything beyond that area. Worse still is the degradation of language as different specialists assign different meanings to the same terms without realizing it. When the same person was an economist, a lawyer and a philosopher (e.g., Adam Smith, the Buckaroo Banzai of his era), he used terms consistently and carefully.

The ultimate result of specialization is that people from different disciplines communicate with each other and believe they have agreement when they really don’t. As the differences compound and create real, practical problems, eventually, people wake up to the fact that the world is nothing like they thought it was, and their brain chemistry flips the panic switch.

Another way to consider what I’m saying is to view increasing specialization as adding layers of abstraction. Each layer of abstraction simplifies the problem space presented by abstracting away details that are presumed to be irrelevant to it. The problem is that as the total problem space is cut into thinner and thinner slices, it becomes harder and harder to integrate the output of those individual slices into an accurate solution for the total problem space because hidden discontinuities arise due to differences in the details that have been assumed away as exogneous to each slice.

Now, one could view slicing the problem space into thinner and thinner specialties as increasing complexity, but the fact is that the problem space– that is, the problems that society faces and must solve on an ongoing basis– never changes, only our individual understanding of it does. The only reason society seems more complex is because every individual within society has been made more simple because of increasing specialization.

Septeus7 says:

I don’t think it is complexity itself that is the problem but the kind interdependency created by globalism that producing our problems. Evolutionary Biology has studied the evolution of systems that get ever more complexity however living systems can be so robust as to exist for 10′s of millions of years where as institution of human empire are but a blink of an eye compared to what nature does seemly with ease.

I believe that answer to solving Joseph Tainter “paradox of complex soceities” finds it’s answer understand the physics of evolutionary biology and basing our social engineering not on the “economics of markets” but based on sound principles in actual physical science. This paper (http://arxiv.org/abs/1010.0410) I believe shows the problem with the very idea of globalism or Imperialism from such a physical standpoint.

Development of robust long term economic development is analogous to principles that create biological robustness i.e. the feature of modularity in design. Neoliberal globalization, by breakdowning local production and national economic independence using “free trade” for reasons of so-called efficiency and global cartelism is akin to ripping out all the firedoors on a ship. Naturally, because of this and floating rate system the fire is truly global maximizing the damage.

Biological systems feature modularity because it prevent the spread of disease and the greater biodiversity allows for easier evolution in terms of population dynamics. So once again we find that “economics” violates the laws of sound engineering, ecology, and evolutionary biology. It is a pseudo-scientific cult that needs to be ended and a new system needs to be built from the ground up by biologists and engineers starting with the accounting system which presently creates fraud.

Lord Keynes identified (unbeknownst to him) the principle fraud of the accounting method determining economic systems when he stated

“If — for whatever reason — the rate of interest cannot fall as fast as the marginal efficiency of capital would fall with a rate of accumulation corresponding to what the community would choose to save at a rate of interest equal to the marginal efficiency of capital in conditions of full employment, then even a diversion of the desire to hold wealth towards assets, which will in fact yield no economic fruits whatever, will increase economic well-being. In so far as millionaires find their satisfaction in building mighty mansions to contain their bodies when alive and pyramids to shelter them after death, or, repenting of their sins, erect cathedrals and endow monasteries or foreign missions, the day when abundance of capital will interfere with abundance of output may be postponed. “To dig holes in the ground,” paid for out of savings, will increase, not only employment, but the real national dividend of useful goods and services. It is not reasonable, however, that a sensible community should be content to remain dependent on such fortuitous and often wasteful mitigations when once we understand the influences upon which effective demand depends. ”

But this a fraud because it assumes that spending “digging holes” is a economically “neutral” activity that has no immediate effect on capital. It assumes that the increase in spending activity which will result in the increases of equal worth as determined by standard accounting. But digging holes is not a neutral because it physically impossible for any activity to be “neutral” you need to shovels, feed the workers, and buy the transport for the works as well using fuel. Every physical activity depletes some physical capital or labor value but it not deducted.

In terms of the current MMT accounting system the activities of building a factory out of private savings is the same as public works project digging holes and filling them up again because the increase in total economic spending marks up the balances in accounts exactly the same way.

However, the physical cost of capital degradation isn’t included, also the opportunity costs aren’t reflected in the balance sheets. A easier and neutral way to increase spending and demand is simply to have spend everyone time limited debit cards which will be credited every time there is shortfall in demand.

The lack of MMT financial accounting to measure the effects of the use of physical capital represents a fraud. The marking up people’s account based on digging holes and saying it is the same a building a functional factory is the broken window fallacy hidden by the accounting system.

If economically destructive activity increases demand then War should be the most efficient means of lifting us out of depression but this absurd.

MMT economists have no understanding of what public spending should be sent on in order to offset the immediate cost of capital degradation, environment damage, and opportunity costs because they have no theory of production.

Economic reality is at least trinary in it’s dimensions and thus we have reached the limits of a system based on binary accounting. In order to factor in the physical and political dimensions without computer trading schemes and FIRE sector scams messing up the information about stocks and flows and thereby mispricing things in markets and even creating phony market rackets we need a new system.

I suggest the creation of an trial entry accounting system based on the ideas of a metacurrency that employs what I call vectored credits and debits as opposed to the scalar quanties of credit and debits we use today.

I am wondering if Yves or perhaps Steve Keen would be interested in constructing such a system in order to deal with problems of why “Credit money fails” and why regulation doesn’t last long enough to prevent systematic decay.

I also would to ask everyone including Yves if any economist has every considered building a higher order accounting method and what they found upon investigation?

Seriously? Has anyone done this or I’m just crazy for even thinking it?

I’m unaware of any such proposals and given the issue of complexity I believe I have come full circle on Taintner’s complexity collapse theory so I will end here.